How to best implement education savings accounts

A newly enacted law could soon transform the educational landscape in Nevada, providing families access to a wide universe of educational options.

In May, Gov. Brian Sandoval signed into law a universal education savings account option, making Nevada the fifth state to enact ESAs and the first state to ever have a universal education choice option in place.

Rarely does a policy reform hold the potential to be this truly transformational. Typically, reforms merely tinker at the margins or take hold slowly. Other times, changes come about as an under-the-radar disruptive innovation, as products that were once considered substandard — think cellphones or personal computers — are improved to the point they outcompete the prior industry leader (land lines and mainframes), as Harvard professor Clayton Christensen has identified.

Yet Sandoval has advanced one of those rare, genuinely consequential reforms. Education savings accounts will be available to all students enrolled in public schools. Any family that chooses to manage a parent-controlled savings account can use it to pay for private school tuition, tutoring, online learning and dual-enrollment college courses, among other options. A minimum of 90 percent of the funds that would have been spent on a student in a public school can instead be deposited onto a restricted-use debit card, enabling parents to pay for a variety of education-related services, products and providers. Parents can even roll over unused funds from year to year.

To say such a universal education choice option is groundbreaking would be an understatement. But now the careful work of implementation begins.

Those responsible for implementation in Nevada will face some difficult decisions. Luckily, they can learn from the experiences of states such as Arizona that have preceded them. First, the Treasurer’s office — jointly responsible along with the state Department of Education for administering the new ESA option — should maintain a list of approved expenses. As was learned in Arizona, such a list saves those working to manage the program thousands of hours of phone calls (and prevents many headaches for families). Maintaining a “white list” of approved expenditures and publicly displaying it on a state website can make the universe of available options transparent for participants. A white list is far preferable to a “black list” of prohibited expenditures, because service providers, schools, products, etc., can request to be added to it, encouraging innovation and engagement.

Second, families should be empowered to do as many ESA-related transactions as possible online. They should be able to apply for an account online, to report their expenditures online and to communicate with the appropriate state agencies online. Early in the program’s history in Arizona (which created ESAs in 2011), the sole option open to parents for reporting expenses was to submit paper receipts to the state. Arizona has since moved much of this reporting requirement online.

Third, as education researcher Jonathan Butcher explains, families should have a customer-friendly experience when they have questions about their ESA account. There should be devoted staff acting as ESA program liaisons to families, so that a family’s file is handled by the same individual at the department when they have questions.

Nevada is now a leader in education choice. Moving forward, information will be key for families. Those working to implement the ESA option should provide clear explanations of how the option functions, when families can enroll, when and how funds will be distributed, how much families will receive, and how families will need to provide information about expenditures.

Spread the word! ESAs hold the potential to allow nearly every family in Nevada to completely customize their child’s educational experience. Parents should be aware that the option is on the table, as should education providers and prospective providers. A good supply-side response will be critical to ensuring families have a wide variety of providers and products from which to choose.

Lindsey M. Burke is the Will Skillman Fellow in Education Policy at the Heritage Foundation